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As an online marketplace operator, you offer a service for businesses to reach new customers and for buyers to browse sellers according to their needs. You provide a platform for these transactions to occur, whether your users trade in goods or services. Operating an online marketplace can be a successful venture if you plan appropriately and are smart with your business decisions. However, when you operate such a platform, you have legal obligations to both the businesses you contract with and the buyers that use your site. This fact is especially true when you deal with consumers. Therefore, this article will go through five reasons why you need to know New Zealand consumer law as an online marketplace operator.

1. You Could Be Liable if Your Seller Misleads Buyers

Under the Fair Trading Act, anyone in trade cannot:

  • mislead or deceive their customers;
  • make unsubstantiated claims about the products or services they sell;
  • engage in unfair sales tactics; and
  • rely on unfair contract terms.

Your sellers are likely in trade if they regularly engage in commercial activities, such as regularly selling goods from your online marketplace for their business. Therefore, they need to meet these requirements and ensure that they do not mislead or deceive their customers about the goods or services they sell. Your business also needs to observe these prohibitions against misleading conduct.

People who engage in private sales do not qualify as being ‘in trade’. These are typically consumers engaging in one-off sales in their personal capacity.

You can provide disclaimers in your marketplace terms and conditions that say you are not responsible for your sellers’ conduct, potentially limiting your liability if they do breach these obligations. However, this may not protect you entirely in court proceedings. Therefore, you should still endeavour to make sure your sellers comply with this consumer law. That way, if a dispute between a seller and buyer leads to legal action, you can point to your efforts to ensure seller compliance as a responsible marketplace operator.

For example, make it clear and easy for sellers to list their prices and any extra fees.

2. Your Sellers Need to Meet Consumer Product Guarantees

Another part of consumer law is the Consumer Guarantees Act. Among other things, this sets out a minimum standard for commercial traders selling goods or services to consumers. Your sellers that sell products to consumers will need to meet these consumer guarantees, making sure their products:

  • are fit for purpose;
  • meet an acceptable standard of quality;
  • match their descriptions;
  • are delivered on time and in good condition; and
  • are sold legally.

Depending on your role as an operator in the marketplace, you will not need to worry about meeting these guarantees yourself, as you do not sell the products. However, it can be worthwhile to include requirements that your sellers meet these conditions in your terms and conditions. Notably, if your marketplace gains a reputation for having difficult sellers that do not comply with this minimum standard, then this can lead to:

  • dissatisfied customers;
  • lower turnout; and
  • legal complications.

Therefore, you need to know what this appropriate standard for consumer products looks like.

3. You Need to Provide Services That Meet the Legal Standard

These same consumer guarantees apply to services, which you will need to be aware of if your online marketplace provides services to consumers. If your business offers a service, you need to make sure that:

  • you carry it out with reasonable skill and care;
  • it is fit for purpose;
  • you carry it out within a reasonable time frame where you have specified none; and
  • you charge a reasonable price where you have not done so already.

For instance, you may offer a payment service through a validated payment portal for your buyers and sellers on your online marketplace. Therefore, it is your responsibility to ensure this payment portal is fit for its purpose and works like it is supposed to. 

If you only work with other businesses, you may be able to contract out of the Consumer Guarantees Act. However, you cannot do this with consumers. If you attempt to, you could be misleading them, and you yourself could face penalties under the Fair Trading Act.

4. Consumer Law Will Influence What You Need to Put in Your Terms and Conditions

Your marketplace terms and conditions need to be:

  • transparent;
  • in plain language;
  • easy to understand; and
  • easily accessible.

This document protects your business and can limit your liability in various situations. Having an understanding of consumer law and what responsibilities you have towards consumers will help you draft this document. It will also help you determine what issues you need to cover.

5. You Can Face Severe Fines and Penalties

Finally, knowing about consumer law and how it applies to you will help you avoid the fines and penalties it can incur. Under the Fair Trading Act, if you mislead your users, you could face fines for each offence up to: 

  • $200,000 for an individual; or 
  • $600,000 for a company.

Customers can also bring their case to the Disputes Tribunal, where you may have to pay compensation or other payment.

Key Takeaways

Consumer law will affect how you can operate your online marketplace, both in how you manage your sellers and the services you provide. Therefore, you should look into how it applies to your online marketplace. If you would like more information or help with how consumer law will affect your online marketplace, contact LegalVision’s eCommerce lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is an online marketplace?

An online marketplace is a website where people can list products or services, and other users can browse and buy from those options. TradeMe is an example of an online marketplace in New Zealand.

Does consumer law apply to my online marketplace?

If you offer a service as part of your online marketplace, then that service may have to meet consumer guarantees. The Fair Trading Act will apply to you as an online marketplace operator, which means that you can face fines and other legal penalties for misleading people.

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